Papua New Guinea Prime Minister Peter O’Neill is opposing any cut to Australia’s aid budget for his nation to fund the re-establishment of an asylum-seeker processing centre on Manus Island.

A PNG government spokesman confirmed later that it wanted “the Manus Island centre funded under a separate arrangement’’ from the aid budget.

Australia will spend $492 million on aid to Papua New Guinea in 2012-13 but Foreign Minister
Bob Carr
has refused to rule out using the Australian aid budget to pay for some aspects of the federal government’s new offshore processing policy.

Mr O’Neill’s request yesterday came as Indonesian search and rescue authorities called off a search for a missing asylum-seeker boat reported to have sunk off the coast of Java on Wednesday, after finding no trace of the vessel.

The boat, said to be carrying 150 asylum seekers, reportedly sank in the Sunda Strait between Java and Sumatra about 220 nautical miles north of Christmas Island after issuing a distress call picked up by the Australian Maritime Safety Authority around 1.30am.

Indonesian authorities sent a helicopter and rescue boat to search for survivors. But Basarnas, the Indonesian search and rescue authority, said search teams deployed in the area had found no indication of a vessel. Basarnas head Gagah Prakoso also told the ABC there was no sign of debris or people floating in the water.

The re-establishment of Manus Island and another Howard-era processing centre on Nauru is part of the Gillard government’s attempt to avoid more boat deaths at sea.

But with more than 1000 people arriving on boats since the new policy was unveiled on August 13, Immigration Minister
Chris Bowen
admitted on Tuesday the policy needed to be given more time to work and a rise in arrivals was still expected because people smugglers lied to their clients.

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More than 8800 people have reached Australia on more than 130 boats this year, and at least 604 people are known to have died at sea on such boats since 2009, excluding Wednesday’s incident.

The demand by PNG to fund Manus processing separately puts further pressure on Gillard government efforts to realise a budget surplus, given reopening the offshore centres in a bid to stop the flow of boats is expected to cost an additional $2.3 billion over four years.

Mr O’Neill also said in an ABC interview that he wanted asylum seekers processed on Manus to be resettled as quickly as possible and not to languish for years in the facility.

Prime Minister
Julia Gillard
, who is attending a Pacific Islands Forum leaders summit in the Cook Islands capital of Rarotonga and will meet Mr O’Neill and Nauru President Sprent Dabwido today, has hinted agreement with both countries is close. She insisted yesterday that Australia, Nauru, and PNG were “on the same page’’ in terms of combating people smuggling.

Ms Gillard will also today launch a $320 million, 10-year training fund to promote women in the Pacific, including improving the representation of women in politics and business, and reducing domestic violence.

The developments follow a popular television documentary this week on asylum seekers, Go Back to Where You Came From, with participants including former defence minister
Peter Reith
and former rock star
Angry Anderson
, which was a rare top-10 hit for SBS. The show was among the most watched programs on Tuesday night, with 752,000 viewers.

The first part of the three-part series saw the participants visit the houses of former refugees in Australia before being flown to war-torn Afghanistan and Somalia.

Asked if the program had changed his stance, Mr Reith said he sympathised with some people he had met but only a return to the Howard ­government’s full Pacific Solution, such as turning back boats and ­temporary protection visas, could stop the boats.

Mr Anderson, who plans to seek Nationals endorsement for federal Parliament, said the experience had left him more sympathetic to refugees but “the loss of life’’ at sea had to stop.